Traditional sources of data such as sales figures, financial statements, SEC filings, and presentations do not normally provide timely and comprehensive information. In this era, many investors demand sufficient understanding before they make decisions on where to invest. As a result, many use alternative data.
Many companies have moved quickly to gather, clean, assess, and evaluate useful information from non-traditional sources. Examples of these non-traditional sources are sensor inputs, mobile devices, public records, news websites, satellites, and financial records. These sources are beyond the companies at issue.
How Alternative Data Is Generated
Alternative data is generated through the following methods:
- Individuals – Most data individuals generate is more challenging to process and unstructured. That is because many people generate huge amounts of information every minute.
- Business Processes – Data generated by businesses have structure and aid in giving good perspectives on making financial decisions. This is termed exhaust data. The information results from various business processes.
- Sensors – Data produced by sensors is very unstructured. Because of modern technology and the internet, there are many sensors. They continuously gather signals and deliver them to many devices.
Kinds of Alternative Data
These are the different kinds of alternative data, which are as follows:
Information related to web traffic, click-through rates, demographics, and many others is what web data has. This data type is somewhat helpful in assessing the results of the popularity of brands or websites and the results of marketing efforts.
This kind of alternative data comes from electronic devices such as mobile phones. It is used for tracking location. Aside from GPS, geo-location data is also picked up by Bluetooth or wi-fi signals.
Data from email receipts are gathered when a product is delivered, or a service is availed. The information comes from responses to rewards from a rewards app, invoices, and opt-in messages, among many others. This is somewhat useful for keeping track of retail income.
Point-of-sale or POS transactions have much information about price trends and the number of sales. It also has information about the popularity of a service or product and what consumers prefer.
Even though satellite imagery is costly, this alternative data type is becoming more and more popular. Data is gathered from low-level drones or satellites. Raw data is available through images. These images are used to get the information needed.
Just like satellite imagery, economic decision-making can be somewhat easier through weather pattern data. This data can be used to determine the amount or kind of product that is expected to be supplied by a region or the commodities that can be availed.
Use Cases of Alternative Data
Investment and Management of Assets
Alternative data can be used in many ways in the investment and management of assets. Some of these uses are to uncover predictive revenue signs, manage risks, make better investments through analysis of spending trends and income information, and predict sales, future purchases, and recessions in different categories.
Corporate alternative data can be utilized to assist businesses in making their marketing research more effective than their competition and make better financial decisions. The use cases of alternative data determine growth opportunities, check the spending trends and income data, and comprehend inclination towards brands and changes in a subscription.
Aside from businesses and financial companies, alternative data is becoming more useful for policymakers to help them create plans and reports for their departments. They can gather transaction data from credit cards, website information and scraping, social media posts, product reviews, and online browsing activities such as activities by India proxy.
Ways to Obtain Alternative Data
Here are the different ways on how to obtain alternative data:
Web scraping or web harvesting is what programmers often do to write codes so that they can gain access to available information on the internet. It involves going through web pages and many links. Then, the information needed is downloaded from pages by using many text functions to process data.
Raw data can be obtained from any source because it is unprocessed. Sensors can provide raw data, which is mainly composed of numbers. Because it is raw, the alternative data has not gone through noise removal, cleaning, and other processes.
Some businesses get licenses to gather exhaust data, such as POS transactions and credit card transactions from various companies. Then, this data is processed in formats that can be utilized easily and sold to other corporations.
Finally, you have a better understanding of what alternative data is. It has been dubbed as the new oil because investors always try to find new methods to improve it and make it more beneficial for them. The concept of alternative data is still new, but it has been gaining more popularity.
Featured Image from Free-Photos on Pixabay